June 1, 2015    3 minute read

Globalisation: Corporate Corruption and Bribery

   June 1, 2015    3 minute read

Globalisation: Corporate Corruption and Bribery

As globalisation has continued to liberate countries that were previously on the fringes of global markets, coupled with increased economic activity, a darker side to commerce emerges in the form of ‘greasing the wheels’ through corporate corruption and bribery.

Such activities heighten the reputational risks for organisations, especially when expanding to new regions and markets. Thus they may face corruption risks in different forms including bribery, money laundering, bid rigging, price fixing, conflict minerals and even human trafficking.

To prevent such risks manifesting themselves and causing concern, organisations will need to ensure that their compliance procedures can evolve at the same rates as the prevailing market risk does. It was reported that only 27% of survey respondents train their third party counterparts at least once a year on anti-bribery and corruption issues, whilst 14% educate their third parties every two years and 10% train their third parties every 3-5 years.

This is a rather underwhelming yet puzzling figure, which gives rise to many questions, not the least being why organisations may not be making significant steps towards avoiding colossal fines issued in recent times, and once could consider more importantly, the detrimental reputational risk. One would have assumed that average FCPA fines of $156.6 million in 2014 would be enough to spur a surge in action but it seems as though the reason for these seemingly lax approaches to anti-corruption procedures may be somewhat justified.

Ultimately, organisations may need to allocate even more resources to their compliance functions for the purpose of enabling for more flexibility in their approach to anti-corruption practices by third parties and equivalent stakeholders. With a considerable proportion of anti-corruption training being automated, it becomes harder for compliance professionals to not overlook the unique risks of each third party that their organisation partners with. Even with the risks being identified, the fact remains that there are more than 2,900 third-party relationships that many organisations must manage with limited resources and time.

Organisations need to ensure that they can create better integration between their compliance departments and finance departments so that communication between these departments may be strengthened. Achieving this should give rise to greater knowledge sharing and consequently greater understanding of the threats in a more practical context. Again, this may take a considerable amount of time, in addition to expend additional resources, which would ensure best-case practices in dealing with such.

The recent rates of change in global markets and their nature can be described as unprecedented. While it may be overly ambitious to propose that organisations expand their compliance functions as they do their market operations in these conditions, one must consider the ramifications of reputational risk and monetary consequences of failure to curb the culture of bribery that repeatedly creeps into the different global markets. The efficient expansion of the compliance functions may need to be achieved through even greater investments in technology and automated systems that are designed with the different market challenges in mind. Considering, the number of third parties an organisation may have, this will be very difficult to do. Difficult, but necessary.

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